Ex Parte Southern Cotton Oil Co.

SOMERVILLE, J. 1. It is a well-settled rule of the common law that ‘‘the payment of an amount less than that for which the debtor is liable does not. constitute a valid accord and satisfaction, unless there is a bona fide dispute or controversy as to the debtor's liability, or as to the amount due from him, or unless the damages are unliq-uidated.” 1 Corpus Juris, 554, § 74. This rule is of course qualified in this state by section 3973 of the Code, which provides that — • “all receipts, releases, and discharges in writing * * * must have effect according to the intention of the parties thereto.” Hodges v. Tenn. Implement Co., 123 Ala. 572, 26 South. 490. “While it is not necessary that the dispute or controversy should be well founded, it is necessary that it should be in good faith. Without an honest dispute, an agreement to take a lesser amount in payment of a liquidated claim is without consideration and void. A dispute cannot be raised for the mere purpose of extorting money. And an arbitrary refusal to pay, based on the mere pretense of the debtor, made for the obvious purpose of exacting terms which are inequitable and oppressive, is not such a dispute as will satisfy the requirements of the rule.” — 1 Corp. Jur. 554, 555, § 75. “The authorities bearing on this legal question express the principle in somewhat varying phraseology. The question in this class of cases is, whether there is a consideration to uphold the release, or agreed compromise. The surrender of a mere assertion, of claim, or the withdrawal of a threat to sue, when the claim, is without legal merit, whether its legal invalidity is known or not, will not uphold a release, or agreement of compromise. ‘When a claim is absolutely and clearly unsustainable at law or in equity, its compromise constituted no sufficient legal consideration.’ Prince v. Prince, 67 Ala. 565; Prater v. Miller, 25 Ala. 320; s. c., 60 Amer. Dec. 521, and note; Hoge v. Hoge, 26 Id. 52; Cassell v. Ross, 85 Id. 2701; Pitkin v. Noyes, 97 Id. 615. “We must not be understood as affirming, that every compromise, or agreement'of compromise, may be avoided by proof of the invalidity to the claim asserted. What we have said must be limited to eases of like kind. Whenever there is a bona fide claim, based on colorable right, such as conflicting or indeterminate testimony from which inferences are to be drawn, and many other supposable categories, it would seem compromises will not only be upheld, but the law encourages them. Knotts v. Preble, 99 Amer. Dec. 514; Banners’ & Mer. Ins. Co. v. Chesmitt, Id. 492, and note; Perryman v: Allen, 50 Ala. 573.” Ernst Bros. v. Hollis, 86 Ala. 511, 513, 6 South. 85, 86. *706 The reason why there must be a bona fide dispute as to the amount due in such cases is that without some concession there would be no valid consideration for the agreement for satisfaction. 1 Corp. Tur. 527, § 12; Hand Lbr. Co. v. Hall, 147 Ala. 561, 41 South. 78; W. Ry. of Ala. v. Foshee, 183 Ala. 182, 62 South. 500; Daniel v. Hughes, 196 Ala. 368, 72 South. 23; Ernst v. Hollis, 86 Ala. 511, 6 South. 85. As said by the Court of Appeals of New York:' “If a debt or claim be disputed * * * at the time- of payment, the payment, when accepted, of a part of the whole debt is a good satisfaction and it matters not that there was no solid foundation for the dispute. The test in such cases is: Was the dispute honest or fraudulent? If honest, it affords a basis for an accord between the parties, which the law favors, and the execution of which is the satisfaction.” Simons v. Am. Leg. of Honor, 178 N. Y. 263, 70 N. E. 776; Fuller v. Kemp, 138 N. Y. 231, 33 N. E. 1034, 20 L. R. A. 785; Ness v. Minn., etc., Co., 87 Minn. 413, 92 N. W. 333. Plaintiffs contention here is that, since a plea of accord and satisfaction' must rest not jnerely on the fact of a dispute, but on the fact of a bona fide dispute, an honest claim, asserted without fraud, that there was a real ground for dispute/ there is no good reason for not requiring a defendant to plead the existence of “a bona fide dispute,” in accordance with the general principles that govern in the allegation of defensive matter. According to the New Standard Dictionary, to dispute is “to question or deny the truth, genuineness or lawfulness of [anything]; to argue against, controvert or object to; to strive against, to resist.” As a matter of evidence, the dispute must appear to have been bona fide, that is, real, not simulated, and based upon a ground that is at least colorable, as all the authorities hold; but we think that, as a matter of pleading, it would be a finical and useless refinement to require an allegation of that evidential quality, and that the plaintiff will be fully apprized of the defensive issue relied on by the simple allegation that the amount due was in dispute. The first ground of demurrer was therefore properly overruled. The third and fourth grounds of demurrer deny the sufficiency of the plea, because it does not show that defendant paid a larger sum in satisfaction of plaintiff’s demand than defendant admitted was due. The theory of the demurrer is that, in order to support an accord and satisfaction, not only must the creditor accept less than he honestly claims to be due, but also the debtor must pay more than he concedes to be due, failing in which the transaction lacks respectable support. Demuules v. Jewel Tea Co., 103 Minn. 150, 152, 114 N. W. 733, 14 L. R. A. (N. S.) 954, 123 Am. St. Rep. 315; Weidner v. Standard, etc., Ins. Co., 130 Wis. 10, 110 N. W. 246. But judicial .policy, as well as public policy, favors the upholding of compromises deliberately and understandingly made; and the weight of authority follows the more liberal rule that— “where an aggregate amount is in dispute, the payment of a specified sum conceded to be due, that is, by including certain items but excluding disputed items, on condition that the sum so paid shall be received in full satisfaction, will be sustained as an extinguishment of the whole.” Chi., etc., R. R. Co. v. Clark, 178 U. S. 353, 367, 20 Sup. Ct. 924, 929; 14 L. Ed. 1099; Nassoiy v. Tomlinson, 148 N. Y. 326, 830, 42 N. E. 715, 51 Am. St. Rep. 695; Ostrander v. Scott, 161 Ill. 339, 43 N. E. 1089; Tanner v. Merrill, 108 Mich. 58, 65 N. W. 664, 31 L. R. A. 171, 62 Am. St. Rep. 687; 1 Corp. Jur. 555, § 77, and cases cited in note 46; 1 R. C. L. 196, § 31. Our case of Abercrombie v. Goode, 187 Ala. 310, 65 South. 816, does not hold to the contrary, for there was no dispute as to the amount of the mortgage debt, principal and interest, which was claimed to have been extinguished by payment of the principal only. As to the third and fourth grounds of demurrer, we think the plea was sufficient. The sixth ground of demurrer questions the sufficiency of the plea in that the dispute relied on appears to be in regard only to a set-off claimed by defendant, the amount of plaintiff’s primary claim being undisputed. The theory of the demurrer, in this aspect, is that a dispute as to the amount of counterclaims, which would be available byway of set-off in an action to recover the debt claimed, so as to reduce the amount of recovery, is not such a dispute as to the amount due as is required to support the accord. “By the weight of authority, where the debt- or has an offset or claim for damages against the creditor which the latter does not concede, his claim against the debtor, although not disputed, except in respect of the offset or damages claimed, will nevertheless be considered unliq-uidated, the view being taken that there is no material difference between a dispute directly involving the claim itself and a dispute involving an offset against the claim; that whatever may be the ground of the dispute the fact remains that there is one.” 1 Corp. Jur. 556, § 78, and cases cited in notes 48 and 49 ; 1 R. C. L. I9S, § 33. This rule, however, is subject to the qualification that an accord and satisfaction of one disputed claim cannot be used as a basis for the satisfaction of another wholly independent claim between the same parties, as to which there is no dispute, the consideration for the first accord and satisfaction not being sufficient to support the second. Mance v. Hossington, 205 N. Y. 33, 98 N. E. 203; Cartan v. Tackaberry Co., 139 Iowa, 586, 117 N. W. 583; Louisville, etc., R. Co. v. Helm, 109 *707 Ky. 388, 59 S. W. 323; Seattle, etc., R. Co. v. S. T. Power Co., 63 Wash.. 639, 116 Pac. 289; Pollmau, etc., Co. v. St. Louis, 145 Mo. 651, 47 S. W. 563; 1 Corp. Jur. 555, § 77, and note 47. The rule first stated is we think, on principle and on authority, applicable only in those cases where the offset arises out of the transaction upon which the primary obligation was based, and which ipso facto.oper-ates as an abatement or reduction of the amount recoverable therein—such an offset, in short, as is properly a matter for recoupment. See Grisham v. Bodman, 111 Ala. 194, 200-203, 20 South. 514, 516, wherein it is shown that matter for recoupment “goes to the validity, the existence of the plaintiff’s alleged debt or demand,” whereupon the distinction we have noted above, as to the scope of a “disputed claim1,” is legitimately founded. Plea 4 alleges that the account sued on involved a number of debits and credits,' and “that on June 6, 1921 [the date of the alleged accord and satisfaction] the amount then owing to the plaintiff by the defendant was in dispute between them.” We think that the fair meaning of this language is that the dispute related to the amount due by way of balance on the account, and it necessarily excludes the idea of relation to any independent claim of defendant’s against plaintiff. The 6th ground of demurrer was therefore not well taken. The second ground of demurrer denies the sufficiency of the plea, in that it does not allege "that plaintiff accepted the said sum of $81.84 in satisfaction of the account owing from defendant to plaintiff.” It is of course necessary that such a plea should show such an acceptance. 1 Corp. Jur. 576, § 120, citing Montgomery v. Shirley, 159 Ala. 239, 48 South. 679; Cahaha Coal Co. v. Hanby, 7 Ala. App. 282, 61 South. 33, among many other eases. But, as in other cases, it is not necessary to allege the required conclusion if facts are alleged from which that conclusion must be drawn as a matter of law; and the authorities seem to he without dis-sention in holding that, although the acceptance of a tender of money made as for “the balance due” does not carry the legal implication that it is accepted in full satisfaction of the creditor’s claim, especially where there has been no dispute as to' the amount (Harrison v. Henderson, 67 Kan. 194, 72 Pac. S75, 62 L. R. A. 760, 109 Am. St. Rep. 386), yet when the tender is made upon the express condition that its payment and acceptance should operate as a satisfaction of the entire claim, as to the proper amount of which there is a bona fide dispute, the acceptance of the tender must be upon the condition stated, and will as a matter of law operate ipso facto as a full satisfaction. Hand Lbr. Co. v. Hall, 147 Ala. 563, 41 South. 79; Brackin v. Owens, 195 Ala. 579, 71 South. 97; Harrison v. Henderson, supra; Fuller v. Kemp, 138 N. Y. 231, 33 N. E, 1034, 20 L. R. A. 785, 805; 1 Corp. Jur. 558, § 81, and cases cited in note 62. In the instant case the plea alleges that the check tendered to plaintiff, and received and collected by him, carried on its face the words—“% in full to date $81.84.” Such a statement, made in connection with a previous or current dispute between the parties as to the amount justly due, could have but one meaning, which was, we think, incapable of being misunderstood, viz.' that the payment was offered in full satisfaction of the account, and on that condition only. In such a ease, as said by the New York court in Fuller v. Kemp, supra: “Upon receipt of this letter [stating that the check was to be in full satisfaction of plaintiff’s claim] the plaintiff had but a single- alternative presented for his action—the prompt restoration of the money to his debtor or the complete extinguishment of the debt by its retention. The tender and the condition could not be dissevered. The one could not be taken and the other rejected. The acceptance of the money involved the acceptance of the condition, and the law will not permit any other inference to be drawn from the transaction. Under such circumstances the assent of the creditor to the terms proposed by the debtor will be implied, and no words of protest can affect the legal quality of his act.” In Canton, etc., Co. v. Parlin, etc., Co., 215 Ill. 244, 74 N. E. 143, 106 Am. St. Rep. 162, the debtor's check was accompanied by a letter stating that it was “in full of account.” Said the court: “If the offer is made in such a manner, and it is accepted, the acceptance will satisfy the demand, although the creditor protests at the time that the amount received is not all that is due or that he does not accept it in full satisfaction of his claim. The creditor has no alternative except to accept what is offered with the condition upon which it is offered, or to refuse it; and if he accepts, the acceptance includes the condition, notwithstanding any protest he may make to the contrary.” Counsel for appellant relies on a dictum in Hanson v. Todd, 95 Ala. 328, 10 South. 354, that “while a mere tender, though of the whole amount due, when unaccepted, does not operate to extinguish or satisfy the claim, yet, when made in full of the amount due, and accepted, without protest as to its sufficiency [italics supplied], the debt becomes extinguished”—drawing the implication from the italicized clause that, if its sufficiency be in fact protested at the time, the condition is not binding on the creditor. The statement in question, if it must be thus interpreted, is neither sound in principle nor supported by the authorities, and was evidently an inadvertency, for it was at once contradicted by the writer, who proceeded to say: *708 “The creditor may reject a tender on condition that he receive it in full of hia claim, but if he accepts it, he is bound by the condition, and will not be allowed to keep the money and repudiate the condition. * * * A tender, if accented, is accepted as made.” • Both of the foregoing statements are quoted in Hand Lumber Co. v. Hall, 147 Ala. 561, 567, 41 South. 78, without noticing 'the apparent conflict between them, the point here under discussion not being presented in that case. It is sufficient to say of the eases of Hodges v. Tenn. Implement Co., 123 Ala. 572, 26 South. 490, and Roach v. Warren-Neeley & Co., 151 Ala. 302, 44 South. 103, cited by-counsel for appellant, that they involved attempted satisfactions of larger undisputed debts, as expressly stated therein, and are therefore not in point. We hold that the allegations of the plea showed both a tender and acceptance of the check in full satisfaction of the account, as an implication of law and that an express allegation of that conclusion was unnecessary. It results that the 'demurrer to plea 4 was without merit, and was properly overruled. Defendant’s demurrers to replications 2 and 3 were, under the principles above enunciated, properly sustained. Conceding, without deciding, that the condition attached by a debtor to the acceptance of his check, that it must be in full satisfaction of the creditor’s claim, may be waived by the debtor, either by express declarations, or by his acquiescence for a sufficient period of time in the creditor’s repudiation of that condition, with notice to the debtor that the amount of the check has been credited merely as a payment pro tanto (as intimated in Puller v. Kemp, 138 N. Y. 231, 33 N. E. 1034, 20 L. R. A. 805, and in Canton etc., Co. v. Parlin, 215 Ill. 244, 74 N. E. 143, 106 Am. St. Rep. 162), there is nothing in the replications to bring them within the operation of that principle. We have dealt at length with the several contentions of counsel for petitioner, in order that our views upon the legal principles involved in the judgment of the Court of Appeals may be clearly understood; and for the reasons given we think that judgment was without error, and the writ of certiorari will be denied. Writ denied. All the Justices concur, except MeCLEL-LAN, J., not sitting.